Topstep Prop Firm Trading Rules

Topstep Prop Firm Trading Rules are designed to ensure that traders adhere to risk management principles while maximizing their profitability. Proprietary trading firms, commonly known as “prop firms,” provide traders with capital to trade financial instruments such as forex, futures, and stocks. In return, traders share a portion of their profits with the firm. Topstep is a leading prop firm specializing in futures trading, offering an evaluation process that traders must pass to access firm capital.

What is a Prop Firm?

A proprietary trading firm (prop firm) is a financial institution that funds traders with the firm’s capital rather than requiring them to trade with their own money. In return, traders share a portion of their profits with the firm. Prop firms make money by taking a percentage of their traders’ successful trades and by charging fees for evaluation processes.

Topstep is one of the most well-known prop firms, especially in the futures market. Unlike traditional trading firms that require large deposits, Topstep provides traders with a risk-free way to trade, as they only pay an evaluation fee instead of risking their own capital.

Topstep Prop Firm

Topstep is a proprietary trading firm (prop firm) that provides traders with the opportunity to trade using the firm’s capital instead of their own. The company was founded in 2012 with the mission of helping traders develop their skills while mitigating personal financial risk. Topstep primarily focuses on futures trading, offering a structured evaluation process to identify skilled traders who can manage risk effectively. Topstep is a proprietary (prop) trading firm that offers traders the opportunity to trade with the firm’s capital after passing an evaluation process. 

Understanding Topstep Trading Rules

To trade with Topstep’s capital, traders must pass a two-step evaluation process known as the Topstep Trading Combine. The process is designed to assess a trader’s risk management skills, consistency, and profitability.

Step 1: The Trading Combine

This is the first step where traders demonstrate their ability to trade profitably while following strict risk management guidelines. The key rules include:

1. Profit Target: Traders must achieve a specified profit goal within a given time frame.
2. Daily Loss Limit: Traders cannot lose more than a set amount in a single day.
3. Trailing Drawdown: A rule that adjusts based on profits to protect both the trader and the firm from excessive losses.
4. Consistency Rule: Traders must show steady performance instead of achieving their profit target in one or two large trades.
5. Trading Days Requirement: A minimum number of trading days is required to complete the challenge.

Step 2: The Funded Account Phase

Once traders pass the Trading Combine, they move to the next step, where they trade a simulated funded account. The rules remain strict:

1. Adherence to Risk Management: Traders must follow the same loss limits as in Step 1.
2. Profit Withdrawal Plan: There are structured withdrawal options, allowing traders to take out their earnings after meeting requirements.
3. Scaling Plan: Initially, traders can only trade a limited number of contracts, but this increases as they grow their account.
4. Consistency Requirements: Like in Step 1, traders must maintain steady performance without erratic trading behavior.

Key Trading Rules of Topstep

1. No Holding Trades Overnight:
   • Traders must close all positions before the trading day ends, typically by 3:10 PM CT for futures markets.
   • Holding trades overnight results in immediate disqualification and the need to reset the evaluation account.
2. No Trading During Restricted Periods:
   • Certain market events, such as major news releases (e.g., FOMC statements, NFP reports), impose temporary restrictions on trading.
   • Traders must be aware of the economic calendar and avoid executing trades during restricted periods.
3. Maximum Position Limits:
   • Traders can only trade a specific number of contracts at any given time based on their account size.
   • The scaling plan dictates contract limits, preventing excessive risk-taking.
4. Risk Control Measures:
   • Topstep enforces strict risk management rules, ensuring traders do not exceed their maximum drawdown.
   • Automated monitoring tools prevent traders from violating risk thresholds.
5. Use of Approved Trading Platforms:
   • Traders must use trading platforms that integrate with Topstep’s system, such as NinjaTrader, Tradovate, or Rithmic-based platforms.
   • Unauthorized trading software is not allowed.
6. Consistent Trading Strategy:
   • Traders must follow a defined strategy and avoid random, high-risk trades.
   • Frequent style switching or erratic trading patterns may lead to disqualification.
7. No High-Frequency Trading or Algorithmic Trading:
   • Topstep does not permit automated trading systems (EAs, bots, or scripts).
   • Traders must execute trades manually to ensure compliance with risk rules.
8. Proper Trade Documentation:
   • Maintaining a trade journal is recommended to track performance and ensure compliance.
   • Topstep may request trade logs for review in case of discrepancies.

Advanced Trading Strategies and Risk Management

To increase their chances of success, traders must implement effective trading strategies and risk management techniques:

Trading Strategies

1. Trend Following: Traders capitalize on price movements in the direction of the trend.
2. Breakout Trading: Identifying key levels where price breaks through and making trades accordingly.
3. Scalping: Taking small, quick trades within a short time frame.
4. Swing Trading: Holding trades for a few days to take advantage of market swings.

Risk Management Techniques

1. Setting Stop Losses: Ensuring a predetermined exit point to minimize losses.
2. Maintaining Proper Position Sizing: Managing trade sizes based on account balance.
3. Diversifying Trades: Avoiding overexposure to one particular asset.
4. Using a Trading Journal: Keeping track of trades to analyze performance.

Conclusion

Topstep Trading Rules offers a structured approach for traders to access firm capital through its evaluation process. By following strict trading rules, traders can qualify for a funded account and continue trading with the firm’s capital. Understanding key phrases, related terms, and FAQs can help traders navigate Topstep’s system more effectively.

By maintaining discipline, following risk management guidelines, and adhering to trading rules, traders can maximize their success within Topstep’s prop trading structure. Additionally, implementing advanced trading strategies can significantly improve a trader’s chances of long-term success.

Frequently Asked Questions (FAQs)

What happens if I exceed my daily loss limit?

Exceeding your daily loss limit results in disqualification, requiring a reset.

Can I use my own trading strategy in Topstep?

Yes, but it must comply with the firm’s risk management rules.

Is the Trading Combine free?

No, traders must pay a fee to participate in the evaluation process.

How long does it take to get funded?

The time varies based on a trader’s performance and adherence to rules.

Can I withdraw profits from my funded account?

Yes, but there are structured withdrawal policies that must be followed.